Economy

China services sector growth falls to 21-month low in September

China services sector growth falls to 21-month low in September”

BEIJING-Growth in activity in China's service sector slowed sharply in September, a private gauge showed Monday, in contrast with official data showing a faster pace of activity.

In the Caixin services PMI, new business slowed M/M but still hit 52 (above 50 equals expansion), but backlogs fell for the first time in five months, and hiring slowed. The survey also showed the services sector continued to see much less inflation than the manufacturing industry, in line with the view that price pressures in China are concentrated in upstream raw materials industries and are not yet percolating through to the consumer level.

"It is notable that there are signs of weakness in other parts of the economy and I do think services have softened a bit". However, many analysts believe China's robust industrial rally can not be sustained much longer, putting pressure on policymakers to finds ways to energize the lackluster private sector, which accounts for over half of the country's investment and jobs.

The Caixin/Markit services purchasing managers' index (PMI) dropped to 50.6 in September 2014, the lowest reading since December 2015.

The country is counting on growth in services, especially high value-added services in finance and technology. The reading indicated only a marginal increase in services activity that was the slowest for 21 months.

The survey also showed growth in the manufacturing sector last week but slowed in September.

"The Chinese economy generally held up well in the third quarter", Zhengsheng Zhong said, director of macroeconomics analysis at CEBM.

Still, Capital Economics' China economist Julian Evans-Pritchard, who has been predicting a broader slowdown, said it was too early to tell if the weaker Caixin service survey pointed to a turning point yet.

China's central bank cut some amount of cash that some banks hold, as a reserve for the first time since February 2016.



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